Want to spot the next bubble? Look at where Harvard grads work.

Everybody wants to know what the next bubble is, and there's an easy way to tell: Just watch where Harvard grads are going. Then short the hell out of that.

It's called the Harvard M.B.A. Indicator — though it applies to undergrads, too — and it's one part psychology, another part economics. The idea is simple enough: It's a bad sign when more Harvard grads go to Wall Street.

Harvard is a magnet for Organization Kids who excel at coloring between the lines. After graduation, they want to do something prestigious, something remunerative, but mostly, as Kevin Roose points out, something that gives them new lines to color between. That might be Silicon Valley, or it might be Teach for America — or it might be Wall Street, if, that is, the getting looks good.

And the getting looks best right before a crash. Which is when, the argument goes, the Harvard M.B.A. Indicator hits its highest levels, like it did in 1987, in 2000-2002, and in 2005-2008. See, as economist Hyman Minsky explained, financial stability is destabilizing. The longer markets are calm, the more people plan on them staying that way. People take bigger risks and take on bigger debt because it doesn't seem like anything can go wrong — until it does, and all this leverage turns small losses into big ones due to forced selling from margin calls.

But this era of complacency can last a long time. And it's when Wall Street exerts its strongest gravitational pull on Harvard kids. The money keeps getting better and better, and it looks like it always will. All they have to do is follow the Excel-filled road laid out before them.

That's why the more Harvard grads that head for Wall Street, the worse a sign it is for markets. It usually means that the irrational exuberance is about to give way to rational panic.

The good news now, though, is that Harvard kids aren't flocking back to Wall Street in anywhere near the numbers that they did before the financial crisis. As you can see in the chart below from the Harvard Crimson, "only" 31 percent of seniors will be working in finance or consulting next year; down from a high of 47 percent in 2007.

(Courtesy Harvard Crimson)

But the better news is that this share has flatlined around 30 percent the past few years despite buoyant markets. That's partly because post-bailout Wall Street doesn't have the same cultural cachet it once did. And partly because tech looks just as, if not more, lucrative. Which is another way of saying that for all Dodd-Frank doesn't do — and that's a lot — it has, together with higher capital requirements, made big banks a little less profitable.

The Harvard Indicator isn't blinking crimson just yet.

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Matt O'BrienMatt O'Brien is a reporter for Wonkblog covering economic affairs. He was previously a senior associate editor at the Atlantic. Follow